A gunman has killed five people, including two young children, after entering a kibbutz in northern Israel, close to the border with the West Bank.

Residents were ordered to stay inside their houses as security forces searched for the attacker but it was later conceded that he had escaped.

Avi Ochayun lost his wife and two sons in the kibbutz attack

The militant al-Aqsa Martyrs' Brigade claimed responsibility for the attack which came just hours after two Palestinians died near the Metzer kibbutz when their car blew up in what officials said was a failed suicide bombing.

Israel responded by reimposing a curfew on the West Bank town of Jenin and by sending military helicopters to Gaza where they fired at least eight rockets at a large metal workshop.

An army spokesman said the building - believed to be empty at the time of the attack which began at 0200 (0000 GMT) in Gaza City - had been used to manufacture weapons.

In a separate development, early elections called by Mr Sharon after his coalition government collapsed have now been set for 28 January.

'Brutal attack'

The two children killed in the Metzer attack - boys aged four and five - died with their mother as she tried to shield them.

There was shooting for close to 10 minutes then the security forces arrived and we're shut inside the houses

Kibbutz resident

The two other adult victims - a man and a woman - were shot in the communal dining hall of the kibbutz, which supports itself through its farm and the manufacture of pipes.

David Baker, an official in the Israeli prime minister's office, said: "Israelis in their own homes were brutally targeted by Palestinians terrorists."

A resident at the kibbutz told Israel radio: "There was shooting for close to 10 minutes then the security forces arrived and we're shut inside the houses."

Reports from Israel say that the kibbutz was known for its stance promoting reconciliation with the Palestinians and an Israeli withdrawal from the West Bank.

Jenin crackdown

Al-Aqsa Martyrs' Brigade said the kibbutz attack - which also injured seven Israelis - was a retaliation for the killing of a senior member of Islamic Jihad, Iyad Sawalha, by the Israelis on Saturday.

Media reports say Israeli forces have reimposed the curfew on Jenin after the military had begun to withdraw on Sunday.

The pull-back followed the pre-dawn raid which killed Sawalha who was accused of masterminding at least two bomb attacks on Israeli buses.

Binyamin Netanyahu, Israel's new Foreign Minister who is challenging for the post of prime minister, blamed the kibbutz attack on Palestinian leader Yasser Arafat.

He said Mr Arafat should be expelled from Israel, though did not demand the government take immediate action.

The renewed violence and political unrests comes ahead of the latest mission to Israel of a US envoy.

David Satterfield is scheduled to arrive on Monday for talks with Israelis and Palestinians on a "peace roadmap" backed by the United Nations, United States, European Union and Russia.